The official blog of Illinois Issues magazine,
published by the Center for State Policy and Leadership
at the University of Illinois Springfield

Tuesday, October 27, 2009

Back to borrowing

By Bethany JaegerGov. Pat Quinn could propose borrowing roughly $1 billion for the third time since May to keep the state operating through the winter. Tax revenues have slowed, while spending pressures have not. Those pressures include unpaid bills, employee health insurance and financial aid grants for low-income college students.

While short-term borrowing is relatively normal to help the state get through the slow revenue season, the state already borrowed $1 billion in May and an additional $1.25 billion in August. That money, as well as any new short-term borrowing, needs to be repaid by the end of the fiscal year, June 30, 2010.

That’s on top of a $3.7 billion backlog of unpaid bills, according to the state comptroller’s office.

The legislative Commission on Government Forecasting and Accountability recently projected that state tax revenues could come in $900 million less than anticipated.

Although Quinn has had to cut more than $2 billion in spending this fiscal year, he and the legislature recently restored $200 million to fund second semester grants of the Monetary Award Program for low-income college students. But they did not identify a way to pay for the additional spending.

After meeting with legislative leaders behind closed doors in the Capitol Tuesday afternoon, Quinn said he could propose borrowing $900 million to ease the cash-flow problem. “We have to have that just to have liquidity for the months of November and December, January and February,” he said. “That’s historically been a time when state government’s finances — the cash that’s in the till — is the lowest.”

Of the $900 million, some $250 million would potentially be dedicated to pay Medicaid bills and to ensure Illinois continues to qualify for an enhanced federal Medicaid reimbursement rate offered through the federal stimulus program.

The state treasurer and comptroller have to sign off on short-term borrowing plans. It does not need legislative approval. According to Carol Knowles, Comptroller Dan Hynes’ spokeswoman, the comptroller’s office has not received a borrowing proposal from the governor's office.

Hynes, who is running against Quinn in the Democratic primary for governor next February, said in his latest quarterly report that the state carried over a record $3.8 billion in overdue bills from the previous fiscal year at the same time tax revenues took a nosedive. He described the fiscal situation as “grim, and getting worse.”

Democrats have proposed various versions of an income tax increase in the past few months, but they have failed to win approval without Republican support. Fewer votes, a simple majority, would be needed once the legislature convenes its spring session in January.

After meeting with other legislative leaders and the governor, Senate President John Cullerton said: “Nobody wants to vote for tax increases. All you can do is borrow.”

House Speaker Michael Madigan also said there’s close to “no other choice” and that it would push the underlying problem down the road. “This has been done year after year after year,” he said of the short-term borrowing, but he added, “This is a higher amount of money.”

House Minority Leader Tom Cross said the problem has evolved for a number of years. "There’s a real strain on our budget that I’m not sure is going to be able to be met next year,” he said. His spokeswoman, Sara Wojcicki, said Cross also sought clarification about the governor’s priorities. “All this borrowing is something that needs to be carefully scrutinized,” she said. “We want to know how exactly it’s going to be spent, what bills are going to be paid down, why, in that order.”

Senate Minority Leader Christine Radogno added, “I do think there’s a good faith effort to manage, but the overall message here is we still need to look at the spending side of things. And it seems to be more focused on the borrowing.”

The leaders’ meeting kicks off the last week of the legislature’s annual fall veto session. While they and the governor previously vowed to work together to propose new campaign finance reforms during this veto session, they said they did not discuss campaign finance during the closed-door meeting. Democratic leaders met separately with reform advocates, again, behind closed doors.

Wojcicki said Republicans have been kept out of the loop since the end of September. “It seems sort of like an oxymoron: Landmark reform and closed-door meetings without us.”

We’ll keep you posted on new versions of campaign finance legislation throughout the week.

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The bureau follows state government from the Capitol Press Room and writes articles for Illinois Issues magazine, published by the Center for State Policy and Leadership at the University of Illinois at Springfield.
Contact: illinois.issues@gmail.com